Indiana University-Purdue University Columbus (IUPUC) finance professor Ryan Brewer and student Kayla Freeman are featured in the spring issue of Indiana Business Review, the official research outlet for the Indiana University Kelley School of Business.

Their research titled “Inexpensively Estimating the Economic Impact of Sports Tourism Programs in Small American Cities” was first presented last April at the annual IUPUC Student Research Exhibition. The project developed a model for economic impact estimation of an annual sports program not requiring event-specific surveys.  Research studies have consistently shown that sporting events can generate a positive economic impact to the host community. Typically, their economic impact is estimated event-by-event, using extensive surveys of each sporting event, but this is not always practical or even feasible for small communities.

The result of the research culminated in a nine-step process for estimating economic impact.

Nine-Step Process for Estimating Economic Impact

1. Gather primary data: Gather data on event type, event duration and number of participants.
2. Identify key secondary study: From available literature, identify a study (or studies) of similar events with segmentation categories resembling those of the sports program being analyzed. The study should provide average party size, direct spending figures and nonlocal percentages.
3. Segment events: Using the segmentation from the study chosen in stage 2, assign each of the program’s events to an event category.
4. Calculate travel-party days: For each event, multiply the number of parties by the event duration using number of participants as a proxy for number of parties.
5. Estimate total nonlocal parties: From a key secondary study or a similar source, retrieve estimated nonlocal attendance percentages.
6. Multiply the total travel-party days in step 4 by this percentage for nonlocal travel-party days.
7. Apply cost of living adjustment: Using MIT’s living wage calculator (or a similar source), calculate the ratio of the host community’s living wage to the living wage of the key study’s location. Apply the resulting proportion to the direct spending averages.
8. Estimate total direct spending: For each event, take the product of nonlocal travel-party days (step 5) and the adjusted average daily spending for that event (step 6).
9. Estimate total spending multiplier: Calculate the estimated spending multiplier with the following formula: 1.566 + 0.053 x ln(POP) – 0.009 x POPDEN, where ln(POP) is the natural logarithm of the region’s population, in millions, and POPDEN is population density, in thousands of persons per square mile.
10. Calculate estimated range of final demand economic impact: Multiply direct spending by the estimated total spending multiplier. Create an economic impact range by multiplying this result by the capture rate range of 0.6 and 0.7.

Freeman, of Westport, Ind. and the IUPUC Valedictorian of the Class of 2014, graduated in business with concentrations in finance and accounting.  She is currently a doctoral student in finance at the Kelley School at IU Bloomington.

Brewer, assistant professor of finance, earned his Ph.D. from Indiana University Bloomington’s Graduate School in 2011 on the topic of financial economics: intrinsic valuation.